An increase in custom duties on CKD kits and imported components will affect prices.

Based on the proposals made in Budget 2018, locally assembled and fully imported cars will be taxed more. Locally assembled cars will cost between 3 and 5 percent as Finance Minister Arun Jaitley has proposed a rise in customs duty on motor vehicles brought to India as CKDs (completely knocked down). Engine components will go from 7.5/10 percent to 15 percent and duty on CKD kits could rise from 10 percent to 15 percent. Audi, BMW, Mercedes-Benz and Jaguar Land Rover, which have dedicated assembly facilities in India, will be affected by this move.

Completely built up (CBU) or fully-imported cars could also get more expensive. Customs duty on CBUs may rise from 20 percent to 25 percent. Total import duty is already 180 percent, and this could increase it further. Luxury carmakers were not happy with these moves. Mercedes-Benz said the increase in customs duty will reverse growth trend in the segment. “The increase in the basic customs duty of auto parts, accessories and CKD components is unfortunate, and comes as a surprise. It will highly restrict the growth of the luxury car industry," said Roland Folger, MD & CEO, Mercedes-Benz India.

Rahil Ansari, Head, Audi India said "Increase in custom duty is going to definitely affect the prices again, which will further confuse the customer The Union Budget 2018-19 is disappointing and against the spirit of partnership."

Sugato Sen, Deputy Director General, SIAM that the entire auto industry will be affected since most of them source components from outside the country. "The hike in customs duty on CKD auto parts and components was not anticipated," he said.

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